Mr. James Tamm Chief, Fuel Economy Division National Highway Traffic Safety Administration Submitted electronically to http://www.regulations.gov and via electronic mail Docket ID No. NHTSA-2017-0069 Comments on Notice of Intent to Prepare an Environmental Impact Statements for Model Year 2022-2025 Corporate Average Fuel Economy Standards Dear Mr. Tamm, The Alliance of Automobile Manufacturers 1 ( Alliance ) and the Association of Global Automakers 2 ( Global Automakers ) appreciate the opportunity to comment on the National Highway Traffic Safety Administration s ( NHTSA ) Notice of Intent to Prepare an Environmental Impact Statement for Model Year 2022-2025 Corporate Average Fuel Economy Standards ( NOI ). 3 Our comments address the overall scoping aspects of the rulemaking required under the National Environmental Protection Act ( NEPA ), 4 as well as questions posed by NHTSA for stakeholder consideration. Industry strongly supported the 2011 agreement which established a process for developing and issuing Corporate Average Fuel Economy ( CAFE ) and greenhouse gas ( GHG ) emissions 1 The Alliance of Automobile Manufacturers is a trade association representing manufacturers of light-duty vehicles including BMW Group, FCA US LLC, Ford Motor Company, General Motors Company, Jaguar Land Rover, Mazda, Mercedes-Benz USA, Mitsubishi Motors, Porsche, Toyota, Volkswagen Group of America, and Volvo Cars North America. For more information, visit www.autoalliance.org. 2 The Association of Global Automakers represents the U.S. operations of international motor vehicle manufacturers and original equipment suppliers. Our members include American Honda Motor Co., Aston Martin Lagonda of North America, Inc., Ferrari North America, Inc., Hyundai Motor America, Isuzu Motors America, Inc., Kia Motors America, Inc., Maserati North America, Inc., McLaren Automotive Ltd., Nissan North America, Inc., Subaru of America, Inc., Suzuki Motor of America, Inc., and Toyota Motor North America, Inc. For more information, visit www.globalautomakers.org. 3 82 Fed. Reg. 34,470 (July 26, 2017). 4 42 U.S.C. 4321 et seq.
standards for model year ( MY ) 2017-2025 light-duty vehicles. 5 From the regulatory process and structure perspectives, there were two key elements in that agreement: a full and fair midterm evaluation of the Environmental Protection Agency s ( EPA ) 2022-2025 light-duty vehicle greenhouse gas emission standards (to coincide with NHTSA s CAFE rulemaking for those same years) and the establishment of a single, harmonized set of standards by NHTSA, EPA, and the State of California. It is critical that manufacturers have a single, harmonized set of standards to accommodate efficient compliance planning. It is our continued goal that the standards for MY 2022-2025 remain part of a single, harmonized national program to ensure that automobile manufacturers will be able to build a single, light-duty national fleet as stated in President Obama s Memorandum Regarding Fuel Efficiency Standards. 6 We urge the continuation and enhancement of standards harmonization efforts by the three government entities, including not just the standards levels but also ancillary mechanisms such as credit averaging, banking, and trading ( ABT ) systems. We encourage the agency to continue a united effort in the Environmental Impact Statement ( EIS ) development process and to consult with EPA in evaluating alternatives using NHTSA s modeling capabilities. Considerations for Reasonable Alternatives to Be Analyzed in the EIS Applicability of NEPA We support NHTSA s continuation of its long-standing practice of preparing an EIS for each CAFE rulemaking. NEPA requires the preparation of an EIS for all major Federal actions significantly affecting the quality of the human environment. 7 Under Council on Environmental Quality ( CEQ ) regulations, major Federal actions under NEPA include new or revised agency rules, regulations, plans, policies, or procedures. 8 The MY 2022-2025 CAFE standards rulemaking must be considered to be a major Federal action based on the costs imposed on manufacturers and consumers and the significant technology changes that are required for compliance. The June 2016 Draft Technical Assessment Report ( Draft TAR ) for the MY 2022-2025 standards presents NHTSA s simulation results from its assessment of the 5 See auto manufacturer and California Air Resources Board commitment letters to support 2017-2025 regulations at https://www.epa.gov/regulations-emissions-vehicles-and-engines/2011-commitment-letters-2017-2025-lightduty-national. (Last Accessed August 17, 2017.) 6 Presidential Memorandum Regarding Fuel Efficiency Standards, May 21, 2010 https://obamawhitehouse.archives.gov/the-press-office/presidential-memorandum-regarding-fuel-efficiencystandards. (Last accessed August 24, 2017.) 7 See 42 U.S.C. 4332(C). 8 See 40 C.F.R. 1508.18(a). 2
costs of the CAFE standards. 9 Industry average per vehicle costs of $1,020 are attributed to the MY 2022-2025 standards. 10 Total costs range up to nearly $34 billion for MY 2025 alone. 11 The CAFE rulemaking will likely also significantly affect the quality of the human environment. CEQ regulations state that the significance of environmental impacts requires assessment of both beneficial and adverse impacts, and a significant effect may exist even if the Federal agency believes that on balance the effect will be beneficial. 12 The Draft TAR projects GHG emission reductions of 540 million metric tons of carbon equivalent and 1.6 billion of gallons of petroleum saved across the nation due to the improved efficiency of MY 2021-2025 vehicles. 13 Support for the selection of a reasonable set of alternatives to analyze CEQ regulations state that agencies must evaluate all reasonable alternatives in the EIS, including the alternative of no action, and must provide an explanation of the reasons for eliminating alternatives from detailed study. 14 It is appropriate for NHTSA to limit the EIS analysis to the alternatives identified in the NOI. Bracketing a spectrum of alternatives, with a lower bound, upper bound, no-action, and preferred alternative is an efficient use of resources and fully consistent with the underlying requirements for a NEPA EIS. The No-Action, Lower Bound and Upper Bound Alternatives Consideration of a no-action alternative is required for an EIS. 15 As has been done by NHTSA historically, it is appropriate for NHTSA to consider a previously finalized standard baseline as the no-action alternative. The upper bound alternative should represent a higher level of potential standard stringency, but still not exceed a maximum feasible level based on a reasonable balance of NHTSA s statutory criteria. 16 As the Alliance and Global Automakers 9 Draft Technical Assessment Report: Midterm Evaluation of Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards for Model Years 2022-2025. U.S. Environmental Protection Agency, National Highway Traffic Safety Administration, California Air Resources Board. July, 2016. 10 Id. at 13-75, Table 13.10. 11 Id. at 13-75, Table 13.10; 13-89, Table 13.21. 12 See 40 C.F.R. 1508.27(b). 13 Draft Technical Assessment Report: Midterm Evaluation of Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards for Model Years 2022-2025. U.S. Environmental Protection Agency, National Highway Traffic Safety Administration, California Air Resources Board. July, 2016. ES- 11. 14 See 40 C.F.R. 1502.14. 15 40 C.F.R. 1502.14(d). 16 See 82 Fed. Reg. 34,743 (July 26, 2017). NHTSA will analyze the lower bound and upper bound of a range of average annual fuel economy standards that would satisfy EPCA s requirement that the standards be the 3
noted in our responses to the Draft TAR, the present reality of low gasoline prices, market demand, and actual technology performance create considerable uncertainty regarding the augural standards. 17 Nonetheless, it is understandable if NHTSA decides to select the augural standards as an upper bound as part of the joint NHTSA and EPA midterm review process. Balance of Statutory Criteria NHTSA s weighing of a range of alternatives also is consistent with the NEPA EIS process. In determining the maximum feasible level of standards, NHTSA is required to consider technological feasibility, economic practicability, the effect of other motor vehicle standards of the Government on fuel economy, and the need of the United States to conserve energy. 18 In the NOI, NHTSA asks for comments on how it should define and balance these statutory criteria. Historically, NHTSA has defined and applied these terms, and determined the appropriate weighting of the factors, in the context of each CAFE rulemaking. NHTSA s approach has been affirmed by the courts. 19 Most recently, in its 2012 rule, NHTSA summarized the factors to be considered in deciding the stringency of CAFE standards: Technological feasibility refers to whether a particular method of improving fuel economy can be available for commercial application in the model year for which a standard is being established. Economic practicability refers to whether a standard is one within the financial capability of the industry, but not so stringent as to lead to adverse economic consequences, such as a significant loss of jobs or the unreasonable elimination of consumer choice.. [T]his factor can be especially important during rulemakings in which the automobile industry is facing significantly adverse maximum feasible for each model year, based on the different ways NHTSA could weigh EPCA s four statutory factors. 17 Docket IDs NHTSA-2016-0068-0070 and NHTSA-2016-0068-0062. 18 49 U.S.C. 32902(f). 19 The EPCA clearly requires the agency to consider these four factors, but it gives NHTSA discretion to decide how to balance the statutory factors --- as long as NHTSA s balancing does not undermine the fundamental purpose of the EPCA: energy conservation. Center for Biological Diversity v. NHTSA, 538 F.3d. 1172, 1195 (9 th Cir. 2008) See also Center for Auto Safety v. NHTSA, 793 F.2d 1322 (D.C. Cir. 1986) (affirming consideration of market demand in evaluating economic practicability). 4
economic conditions (with corresponding risks to jobs). Consumer acceptability is also an element of economic practicability.[and] economic practicability is a way to consider the uncertainty surrounding future market conditions and consumer demand for fuel economy. The effect of other motor vehicle standards of the Government on fuel economy, involves an analysis of the effects of compliance with emissions, safety, noise, or damageability standards on fuel economy capability and thus on average fuel economy. The need of the United States to conserve energy means the consumer cost, national balance of payments, environmental and foreign policy implications of our need for large quantities of petroleum, especially imported petroleum. 20 NHTSA should continue to apply its well-established definitions of these criteria. This approach will help ensure the agency continues to fulfill its statutory obligations and provide important regulatory certainty to the auto industry and consumers. NHTSA has acted to balance and weigh these factors in each rulemaking in the context of its understanding of then-current technological, economic and national needs and future trends. In the context of the EIS and the upcoming rulemaking, technological feasibility, economic practicability and the effect of other regulations need much greater consideration than previously provided. Experience and data show that the levels of powertrain electrification needed for compliance with the augural standards exceed past estimates and the widespread consumer acceptance of such vehicles remains a challenge for deployment at those levels. Consumer acceptance is a key consideration and one that will span both the technical feasibility and economic practicability statutory criteria. The courts previously recognized that [c]onsumer demand is not specifically designated as a factor, but neither is it excluded from consideration; the factors of technological feasibility and economic practicability are each broad enough to encompass the concept 21 The Alliance, Global Automakers, and many of their member companies provided comments to the Draft TAR record indicating the overall challenges currently being experienced and expected to be experienced in the future with 20 77 Fed. Reg. 62,624, 62,668 62,669 (Oct. 15, 2012). 21 Center for Auto Safety v. NHTSA, 793 F.2d 1322 (D.C. Cir. 1986) 5
consumer acceptance. 22 Responses included comments that the consumer acceptance studies conducted by EPA and NHTSA for the Draft TAR were generally inconclusive and did not adequately capture the complexity of this topic. 23 Air quality and safety regulations require significant investment in technologies that often challenge efforts to improve fuel economy. The delicate balance of competing objectives can amplify cost increases (diminishing affordability), resulting in slowed fleet turnover and its associated oil savings, safety, and emissions benefits. A system-wide regulatory analysis of these factors is warranted when evaluating alternatives for future fuel economy standards. This includes NHTSA s quantitative assessments of criteria emissions and precursor pollutants which should be coordinated with EPA. Such analysis must include quantitative assessments of the rebound effect and the impact of increased vehicle prices on fleet turnover. Similarly, the impact of the rebound effect on the net decrease in fossil fuel consumption and GHG emissions from the in-use fleet requires quantitative analysis for each selected alternative. The appropriate metrics and scope for assessing both the costs and benefits of various alternatives must be national, and not extraterritorial. 24 Likewise, NHTSA s NEPA regulations require the agency to apply a systematic, interdisciplinary approach. 25 In this context, the NEPA regulations warrant consideration of the employment impacts of the alternatives selected for evaluation. Evaluation of the Model Year 2021 Standards Notwithstanding that the midterm evaluation of the augural standards covers MY 2022-2025, NHTSA separately is requesting comment on MY 2021. 26 Due to the unfulfilled commitment from the 2012 joint EPA-NHTSA final rule that was touted as creating a truly harmonized set of CAFE and GHG standards, 27 reexamination of MY 2021 requirements is appropriate and NHTSA should consider whether any provisions developed to address harmonization should be applied. 22 E.g. NHTSA Docket IDs NHTSA-2016-0068-0070, NHTSA-2016-0068-0062, NHTSA-2016-0068-0082, and NHTSA- 2016-0068-0048. 23 Id. 24 See 42 U.S.C. 4321 ( The purposes of this chapter are: To declare a national policy which will encourage productive and enjoyable harmony between man and his environment... enrich the understanding of the ecological systems and natural resources important to the Nation.... ) (emphasis added). 25 49 C.F.R. 520.23(a). 26 See 82 Fed. Reg. 34,742 (July 26, 2017). As part of this rulemaking, NHTSA may evaluate the MY 2021 standards it finalized in 2012 to ensure they remain maximum feasible. 27 See 77 Fed. Reg. 62,627 (October 15, 2012). These standards represent the continuation of a harmonized and consistent National Program Under the National Program automobile manufacturers will be able to continue building a single light-duty national fleet that satisfies all requirements under both programs 6
A senior EPA career official appropriately and recently noted, [i]t should not be acceptable for an automaker that is in compliance with EPA standards to at the same time face penalties under CAFE. 28 Moreover, the Obama Administration signaled its willingness to address harmonization between NHTSA and EPA regulations pre-2022 when it consented to review a petition by the Alliance and the Global Automakers regarding unresolved harmonization issues. 29 The evaluation of MY 2021 regulations is consistent with these previous commitments and new information. This is all the more important given that, even though auto manufacturers continue to make headway with overall fuel economy, NHTSA predicts that manufacturers, on average, are not expected to reach anticipated MY 2016 and 2017 CAFE targets, 30 despite having adopted many of the technologies the agencies expected would improve fuel economy. This is due in part to harmonization limits and shifts in customer choices. Environmental Impacts We support consideration of the full range of potential environmental impacts of new standards, beyond just GHG emissions in concert with EPA. In NHTSA s Final Environmental Impact Statement for the 2017-2025 standards, it considered the impacts on energy use, criteria pollutant emissions, new vehicle materials and technologies, land use, hazardous materials and regulated wastes, historic and cultural resources, noise, safety, and other factors. We urge the agency to review the most recent scientific literature to update its evaluation of these impacts. Other Programmatic Considerations NHTSA indicated that it also will consider flexibilities and vehicle classification in its analysis of maximum feasible standards. 31 We support NHTSA s evaluation of flexibilities as optional pathways to more cost-effective compliance, and agree those flexibilities should include technologies that provide fuel economy 28 EPA Eager to Work with Auto Industry to Evaluate Regulations. USA Today. August 1, 2017. https://www.usatoday.com/story/money/nation-now/2017/08/02/epa-eager-work-auto-industry-evaluateregulations/531632001/. (Last accessed August 16, 2017.) 29 81 Fed. Reg. 95,553 (December 28, 2016). 30 Projected Fuel Economy Performance Report. National Highway Traffic Safety Administration. February 14, 2017. Available at https://one.nhtsa.gov/cafe_pic/my%202016%20and%202017%20projected%20fuel%20economy%20performanc e%20report%20final.pdf. (Last accessed August 16, 2017.) 31 See 82 Fed. Reg. 34,742 (July 26, 2017). As with any CAFE rulemaking, NHTSA will also consider other programmatic aspects other than stringency (e.g., flexibilities and vehicle classification)... 7
benefits beyond those reflected in regulatory test procedures. We believe that NHTSA and EPA should use a coordinated approach to the consideration of maximum feasible standards while respecting NHTSA s statutory constraints on considering flexibilities as part of its analysis. Modifications to the vehicle classification definitions must be considered carefully because they can directly impact standard stringency and result in unintended consequences. Today s mixed classification of crossover utility vehicles ( CUVs ) and the unanticipated rise in their popularity provide a relevant example. Since 2012 (when 2017-2021 CAFE targets were finalized), this class of vehicles has gained significant market share at the expense of traditional passenger cars. In 2012, passenger cars were over 50% market share and CUVs less than 25%. 32 By 2016, passenger car share fell to less than 40% and CUV share rose to over 32%. 33 Increased utility and customer-preferred features of CUVs are driving this market switch. However, CUVs also have truck-like energy requirements which are not well aligned with the passenger car requirements to which some are subject. The current classification criteria motivate four-wheel drive designs that qualify for the more physics-appropriate light truck classification regardless of consumer needs, which can increase both costs and fuel consumption. Conclusion The Alliance and Global Automakers appreciate NHTSA s consideration of these comments. If you have any questions, please contact us. Sincerely, Chris Nevers Vice President, Energy and Environment Alliance of Automobile Manufacturers Julia M. Rege Director, Environment and Energy Association of Global Automakers 32 WardsAuto InfoBank (July 2017). 33 Id. 8